For years, Blue Cross and Blue Shield of Michigan operated an illegal monopoly, violating state and federal antitrust and consumer protection laws to drive up health insurance premiums while limiting reimbursements to medical providers and making it more difficult for Michiganders to access quality health care, state Attorney General Dana Nessel alleges in a new, landmark lawsuit.
Calling it "arguably the most consequential antitrust case ever filed by a state against a health insurance company," Nessel sued Michigan's largest insurer Thursday, Oct. 8, in U.S. District Court in Detroit.
"Blue Cross of Michigan did everything they could to hide some of the alleged misconduct from the public," Nessel told the Detroit Free Press, "so, it took a lot
of work to uncover some of the actions that were happening in our health insurance markets and their impact. ... I believe we are the first state to bring these particular claims."
Court documents lay out a complex scheme that Nessel alleges Blue Cross Blue Shield of Michigan Mutual Insurance Co. used to amass 65% of Michigan's overall commercial health insurance market – and 79% of the preferred provider organization (PPO) health insurance plans – placing Michigan fourth nationally among states with the least competitive markets.
"They didn't accomplish that commanding market power through superior products, marketing genius or skillful business acumen," Nessel said.
Instead, she alleges Blue Cross engaged in "a series of illegal and anti-competitive agreements in conspiracy with the entire Blue Cross Blue Shield network to allocate customers and territories, to restrict product offerings and eliminate competition for health insurance services."
The company, she alleges, also abused its market dominance "to drive the rates it pays health care providers to near the lowest in the nation – sometimes even below the medical providers' own costs to provide care" while at the same time charging consumers more.
Michiganders are facing "historic" rises in health insurance premiums, court documents allege. Blue Cross filed for annual increases of 23.3%-24% in 2026 for individual plan members, and 11.2% for small group markets.
That has led to rising medical debt among Michiganders and "contributed to hospital closures and service reductions throughout Michigan," court documents say. "Hospitals facing inadequate reimbursement have been forced to shutter labor and delivery units, close emergency departments, and reduce staffing levels. These closures have contributed to Michigan’s worsening infant mortality rate, which increased between 2018 and 2022, and have left patients in rural and underserved areas without access to essential services."
One example is the June closure of Sturgis Hospital in southern Michigan's St. Joseph County. Before it shut its doors, hospital leaders cited declining health insurance reimbursements as the primary factor that forced it out of business, according to the lawsuit.
"The Michigan Health & Hospital Association called the closure 'the canary in the coal mine moment for our rural hospitals' and a 2026 report from the Center for Healthcare Quality and Payment Reform identified 10 rural hospitals in Michigan at risk of closing and three at 'immediate risk' of closure, which would leave their communities without healthcare services," the lawsuit said.
Nessel seeks hundreds of millions of dollars in damages
Following a complex, multiyear investigation, Nessel said she now is asking the court to consider whether Blue Cross is guilty on:
- Two counts of violating the Sherman Antitrust Act, which outlaws the restriction of interstate or foreign competition, trade or commerce and prohibits monopolies.
- Four counts of violating the Michigan Antitrust Reform Act, which bans contracts and conspiracies that limit competition, trade or commerce in Michigan. It also outlaws monopolies and attempts to establish trade monopolies in the state.
- One count of public nuisance.
- One count of unjust enrichment.
"We have asked the court to permanently enjoin the defendant from continuing their anti-competitive conduct in Michigan's health care markets and to award the state all available damages, disgorgement and civil monetary penalties," Nessel said.
She acknowledged: "We have no idea ... what a prudent or reasonable dollar amount will be, but we do estimate it will be in the hundreds of millions of dollars. Our goal is to make consumers whole and return unlawful profit back to the insurance customers. ... We're going to fight to make Blue Cross of Michigan pay for the harm it has caused to the fullest extent of the law."
Nessel said the lawsuit also seeks injunctive relief that would bar Blue Cross from engaging in such practices again.
"Through this lawsuit, we will heal our health insurance and heath care markets in Michigan, and we will increase access to and lower the cost of vital health services in our state for everyday Michiganders," she said.
The Detroit Free Press reached out to Blue Cross for comment but did not get an immediate response.
In March, the company reported a $246 million net loss for 2025 on total revenue of $43.3 billion, compared with a $1 billion loss the prior year. The insurer reported it had a negative operating margin and paid out nearly $1.02 in claims for every $1 it charged for premiums.
It was the fifth consecutive year that Blue Cross reported an underwriting loss – even as it has hiked some customers' premiums in recent years by double-digit percentages.
“Even with rate increases, our health plan pricing continued to lag behind the cost of delivering needed health care services to our members in 2025,” Andy Hetzel, vice president of corporate communications, said at the time.
A clash of Michigan health care titans
Earlier this year, Blue Cross was locked in a public battle with Michigan Medicinethat threatened in-network coverage for about 300,000 people as negotiations unraveled over what the company was willing to pay the Ann Arbor-based health system for treating patients covered by its commercial policies.
Without higher reimbursement rates in a new, five-year deal, Michigan Medicine, the academic medical center of the University of Michigan, set a June 30 deadline, saying after that date, it could no longer afford to treat patients with Blue Cross commercial plans. At the same time, Blue Cross said it could not pay Michigan Medicine higher reimbursements because it was trying cut costs to keep premiums low for consumers.
Nessel's lawsuit alleges Blue Cross uses its enormous market share to control the prices it pays for health care services, essentially telling health systems like Michigan Medicine to “take it or leave it.”
"As a general matter, even on the limited occasions when negotiation of payment terms exists, it occurs within a very narrow range dictated by Blue Cross," court documents say.
Caught in the middle were people like Jibran Bashi, a baby boy from Detroit who was born prematurely with "the rarest of rare" heart defects.
Even before he was born nearly two months prematurely in October 2025, Jibran's parents, Andrew and Amanda Bashi, sought medical care for him at Michigan Medicine. Its hospitals had the only multidisciplinary team of physicians in the state capable of treating his unique cluster of heart conditions and who could safely manage Amanda's pregnancy complications.
They were able to identify Jibran's unique medical challenges in-utero and established a plan for his delivery as well as for a series of carefully timed, complex surgeries Jibran would need to survive after he was born. The first surgery would occur just 10 days after he was delivered, weighing just 2 pounds, 13 ounces.
Months later, when the Bashis learned their family could lose in-network insurance coverage with Jibran's doctors because of the Blue Cross-Michigan Medicine contract fight, the couple was devastated.
"During those months, the question hounding Amanda and me wasn't whether Jibran would keep the [medical] team that brought him this far," said Andrew Bashi. "We knew he would. We would never let him lose them.
"The question for us was: What it would cost us? If keeping his team meant going into debt, we'd go into debt. If it meant selling our home, we’d sell our home. If it meant declaring bankruptcy, we'd declare bankruptcy. ... We were a contract dispute away from insurmountable debt."
The Bashis were relieved when Michigan Medicine and Blue Cross came to a deal about a month before the deadline, but Andrew Bashi said it never should have come to that point.
"When one company holds that much power, it doesn't have to worry about what happens to us in a negotiation," he said. "We have nowhere else to go, and they know it. Patients stop being customers. We become leverage. ... In this system, Jibran is a loss on a balance sheet. And when a company's job is to manage its losses, families like ours become something to be managed."
A father's dream: Health care 'driven by results, not revenue'
Jibran will celebrate his first birthday next week, and is scheduled to undergo the biggest surgery of his life in early 2027.
Andrew Bashi said the stress and anxiety the insurance contract dispute created for his family last spring continues to nag at him, and is a symptom of a larger problem in American health care.
"Antitrust law exists because concentrated power gets abused, and the people who pay for that abuse are the ones with the least ability to walk away," he said. "But checking that power is a start, not a finish. More companies whose first obligation is the bottom line won't, on their own, fix a system that treats a baby's heart surgery as a cost to be managed.
"The real answer is health care that's driven by results, not revenue. A system that measures success by whether kids like Jibran grow up, not by whether the quarter closed in the black. ... Until we build something better, lawsuits like this one are one of the tools we can and must use to protect families in the meantime."
Nessel is term-limited after serving eight years as state attorney general. She will leave office in January, to be replacedby the victor in November's election.
"It's my hope that whoever is my successor, that they will understand just how consequential this lawsuit is and the need for it and move forward and, of course, the great impact that dismissing it would have on our state residents," she said.
Detroit Free Press staff writer JC Reindl contributed to this story.
Contact Kristen Shamus: kshamus@freepress.com. Subscribe to the Detroit Free Press.
This article originally appeared on Detroit Free Press: Michigan attorney general sues Blue Cross, alleging illegal monopoly
